On Friday, FICCI president Rashesh Shah said that he met the Arun Jaitley and asked him to begin the process of bank privatisation in a phased manner but here's why the finance minister thinks that it may not happen anytime soon.
As the call for bank privatisation gathers steam in light of the recent Rs 11,400 crore fraud at the Punjab National Bank, Finance Minister Arun Jaitley said that it requires a large political consensus and the opinion in the parliament may not be favorable.
“The issue of bank privatisation involves a large political consensus and involves an amendment to the law (Bank Nationalisation Act). My impression is that in Indian political opinion in the Parliament may not favor this idea,” Arun Jaitely said at an event.
On Friday, FICCI president Rashesh Shah said that he met the Finance Minister and asked him to begin the process of bank privatisation in a phased manner and that only 2-3 Public Sector Banks (PSBs) were enough for the country.
The call for bank privatisation began after the Rs 11,400 crore bank fraud at the Punjab National Bank was uncovered, in which the bank alleged that diamond czar Nirav Modi allegedly colluded with its former employee to obtain fake MoUs.
Industry body Assocham also urged the government to reduce its stake to less than 50% in PSBs so that they can work with the sense of accountability and with the interest of stakeholders and depositors on priority, four days after the PNB fraud became a public knowledge.
It was soon joined by FICCI which said that the problems in the PSBs are deep-rooted and government’s Rs 2.11 lakh crore bank recapitalisation is not enough to save the banking system.
Top industrialists too joined the league for bank privatisation. Godrej chief Adi Godrej said that he supported the call for privatisation of bank and that it was good for the country as there are ‘less or no’ frauds at private banks. Chairman of Bajaj Group Rahul Bajaj also pitched for bank privatisation.
Meanwhile, top banker Uday Kotak said the recent events of fraud and stress in the banking and financial system made him embarrassed as a banker. He did not speak on the bank privatisation but he did raise the issue of governance and ownership at PSBs, calling for a significant policy and institutional thinking rather than more talks.
The Indian banking system is reeling under a mountain of stressed assets, fifth largest in the world. Besides Rs 9.46 lakh crore of bad loans, bank frauds and lack of checks and balances are being flagged as a problem. To deal with the situation, Arun Jaitley said that tighter laws will be in place to ensure that culprits are punished.
Meanwhile, for bank-cleanup, the Reserve Bank of India has issued a uniform and strict framework for stressed asset resolution under the Insolvency and Bankruptcy Code (IBC). About 40 companies with big corporate defaults are currently undergoing insolvency proceedings under the IBC.